Summer 2012 In Site Summer 2012 By Kevin Greene, Inga Hall, Nicola - PDF document

Summer 2012 In Site Summer 2012 By Kevin Greene, Inga Hall, Nicola Ellis, Laura Ludlow & Lee Forsyth Construction and Engineering Welcome to the Summer 2012 edition of In Site. This edition covers the following topics:  NEC3 issues for 2012;  Recent natural justice cases, the use of adjudicator initiative and adjudicator “forum shopping”;  Hot topics in the world of PPP/PFI as they impact on the construction and engineering sector; and  a case update covering the scope of legal professional privilege, the developing law on severability of adjudicators’ decisions, and implied terms. For more information on any of these articles, or on any other issue relating to construction and engineering law, please contact any of the authors or your usual K&L Gates’ contact. NEC issues for 2012: Olympics, heavy rain and challenging payment Olympic delays With recent reports that the Olympic Park has successfully been delivered on time and within budget, this is good press for NEC3, being the contract of choice for the Olympic venues. The bad news for other construction sites in the capital is the significant disruption expected to the roads during the Olympics. The road closures and heavy traffic expected in the lead-up to, and during, the Olympics are likely to result in delays in goods, materials and equipment being delivered to construction sites. It is difficult to predict the extent of these delays. Some employers and contractors will have agreed terms in their contracts to deal with this, or perhaps may have incorporated such anticipated delays in their programme. Where this is not the case, who bears the risk? Under NEC3, unless a compensation event occurs as set out in clause 60.1, it is likely that the contractor will bear the risk and resulting cost of any Olympic related delays. A contractor may say that the delays fall within the category of “prevention events” dealt with in clause 60.1(19), but in order to do so successfully, must jump the 3 hurdles in clause 19, namely demonstrate (i) that the “event” (and query whether the event is the congestion or the Olympics themselves) has either stopped the contractor from completing by the completion date or completing the works at all, (ii) that the event was one that neither party could prevent, and (iii) that it would have been unreasonable for an experienced contractor, at the contract date, to have allowed for it. These are difficult hurdles to overcome, and an employer may say that an experienced contractor would have foreseen delays arising from transport difficulties during the Olympics, even if a contract was entered into before the publication of the Olympic Route Network (published in July 2010, and setting out road closures and restrictions). An issue between parties could well be whether, even from July 2005 when it was announced that London would host the 2012 Olympics, it is arguable that an experienced contractor would foresee the likelihood of disruption. In any event, the contractor should mitigate any delays and losses arising. It should give an early warning as soon as possible of anticipated delays, and should consider, with the employer, whether steps such as re-programming deliveries and activities (possibly outside normal working hours),

Summer 2012 In Site suspension during the games and/or acceleration thereafter were cost-effective and viable steps in mitigation. Adverse weather Another issue that may have arisen on construction sites recently is the heavy rain falling throughout April and into June. After the wettest April in 100 years, to what extent will the contractor be entitled to claim an extension of time under NEC3 for disruption to progress on site? Unlike other standard forms which refer to “exceptionally adverse weather”, NEC3 takes a more prescriptive, objective approach. The Contract Data identifies that cumulative rainfall and the number of days with more than 5mm of rainfall are to be recorded each month. Under clause 60.1(13), the contractor will only be entitled to claim additional time or money for the difference between the weather conditions encountered and the historical weather data shown to occur “on average less frequently than once in ten years”. For example, if there has been no more than 4 days of rainfall over 5mm in April occurring once in ten years, and April 2012 saw 6 days of rainfall over 5mm, the contractor would only be able to claim for 2 days. The location of where the weather measurements should be taken from is stated in the Contract Data and this should be as close to the site as possible to represent accurately the conditions experienced on site. Challenging payment If the employer considers that the project manager has assessed an amount due to the contractor incorrectly, perhaps including an incorrect assessment of the impact of a compensation event, the employer can ask an adjudicator or the stated “tribunal” (i.e an arbitrator or the Courts) to open up and review the project manager’s decision. Recent Scottish case law confirms that the party seeking to challenge payment bears the burden of proof. Although a project manager can correct his or her own assessments or certificates in subsequent assessments, it would be unusual for him or her to do so unless asked to by one of the parties. In terms of clauses 50 and 51 of NEC3, the sum assessed and certified by the project manager remains the sum due unless corrected by the project manager, or by an adjudicator or tribunal exercising their powers to review and revise any action or inaction of the Project Manager. The party seeking correction should bear the burden of persuasion. If (say) the contractor seeks further payment, the burden is on him. If the employer seeks to argue that the project manager’s assessment is too high, the onus is on him. Natural justice and an adjudicator’s initiative Natural justice (or the lack of it) has long been one of the more popular themes in adjudication cases. The decisions reached by the courts generally take a reassuring common sense approach to the question of whether or not the parties have been given their right to a fair hearing and been heard by an impartial tribunal. An adjudicator who takes into account material that was not before the parties, or applies his own experience and knowledge to a particular question, may be in breach of the rules of natural justice if he does not give the parties an opportunity to comment on his approach. A breach must be material rather than peripheral, such as where the adjudicator fails to bring to the parties' attention a particular point that is either decisive or of considerable importance to the outcome of the dispute. 2